March 16, 2009

ITB report: key trends and learnings

The economic crisis remained the dominant theme throughout the ITB conferences, which ran parallel with the exhibition, with new trends, strategies and predictions for the future debated at length.

I have summarised some of the aspects that are most relevant and that can be applied as key learnings for Cape Town as we lead the way to a new way of doing business in tourism.

In PART THREE of my ITB Report I will expand upon the key learnings for Cape Town and the business and marketing tactics Cape Town Tourism presented to the International Destination Council at ITB as part of our resilience strategy.

On the opening day of ITB, Dr Auliana Poon of Tourism Intelligence International led a discussion on Best Practice in Destination Marketing. Her focus was on the role that the private sector could play in the current tough economic times, saying that “the tourism sector now needs dynamic private-public sector organisations that can take the lead with extraordinary marketing and business strategy, innovation and the exploitation of distribution channels”. She singled out South Africa and Costa Rica as international best practice tourism models because “they care” about the community and the environment.

Rolf Freitag of IPK International presented the official ITB Travel Trends Report. He illustrated how the “consumer greed of the recent years has turned into consumer fear with mass consumer travel confidence shrinking”. He went on to say: “Whilst the travel market showed remarkable resilience against challenges like terrorism, natural disaster, SARS and Bird Flu, we now finally have a real global economic crisis.”

Some highlights in 2008 travel patterns to point out are:
• Germany remains the largest outbound market from Europe with 76 million travellers, followed by the UK (65 million) and France (51 million).
• 75% of outbound growth is from six markets: Russia (1,8 million trips), Netherlands (1,1 million trips), Poland (1 million trips), UK (0,8 million trips), Ireland (0,7 million trips) and Greece (0,5 million trips).
• Cruise travel (7% growth) has exceeded plane travel in growth (1%), but low-cost flight trips show strong growth at 4%.
• In 2008, 88% of travel was short haul and 12% long haul.
• The top destinations are now: Spain with 12% of travel market, followed by France with 10% and Germany with 8%.
• Paris remains the top travel city with 12,6% of the world city travel market, followed by London (12,3%), Vienna (5,3%), Rome (5,2%) and Berlin (4,7%).
• The top spending markets are Switzerland, followed by Ireland, Denmark, Norway, the Netherlands, Austria and the UK.
• The internet accounts for 40% of travel bookings, followed by travel agents and direct bookings in second and third place respectively.
• 40% of travellers booked a package or “dynamic package”.
• Holiday bookings online were broken down as follows: 41% (15% growth) booked online, while 15% used the internet for information only (6% growth). Internet users now account for 56% of all travel bookings (12% growth) and non-internet users account for 44% (2% decline).
• Leisure remains the biggest reason for travel with 294 million trips (5% growth), followed by business travel (1% growth) and other leisure travel showing a 4% growth.
• In terms of holiday segments, touring is first (14% growth) followed by city breaks (5% growth), sun and beach (5% growth) and country and nature (2% growth). Four out of 10 people chose sun and beach as the reason for travel in 2008.
• Top language travel groups are: English followed by German, French and Dutch.

ITB 2009 was held at Messe Berlin

The 2009 forecast is grim, with growth predicted to stagnate across most international markets. Some remarks that stood out for me are:

• International Air Transport Association (IATA) flights dropped by 5,6% in January 2009.
• Optimists in the United States believe that we will see recovery by 2009, whilst the experts in Europe believe we will see two meagre years with slow recovery by 2011. The Middle East believes the crisis will last till 2012.
• Four out of 10 Europeans will change their travel behaviour in 2009, which accounts for 41% of the European market. The industry is advised to focus on the more resilient European markets and respond with real value-for-money offerings, because the biggest impact will be on spend.
• Two out of three travellers from North America will change their travel behaviour, whilst South American travel should not be affected negatively, ie will experience a “cooling” not a recession.
• Asia is showing the lowest travel level since 2001 with only China and India still showing growth, but at a reduced speed in 2009. A whopping three out of five travellers will change their travel behavior with less spend and different destination choices being the most significant changes.
• Not all travel sectors will be affected equally ie:
- less decrease in domestic travel
- slight decrease in outbound to short-haul
- greater decrease in long-haul
- crisis in business and incentive travel

The 2010 World Cup mascot, Zakumi, was very popular at ITB 2009

• 2009 will bring:
- more value-for-money seekers
- more domestic travellers
- more reliance on internet
- more web-meeting technology, forcing the business travel sector to change tactics dramatically

The message was clear: “Right actions can change the course of the future and ensure that we emerge on the other side stronger and as leaders in the tourism sector.”

The session was followed by an interesting debate led by Geoffrey Lipman of the United Nations World Tourism Organisation (UNWTO) on tourism’s role within this global financial crisis.

The three key aspects for tourism are resilience, stimulus and investment in innovation, and the green economy. The importance of a long-term, solution-driven strategy with dynamic short-term actions was highlighted to allow for a quicker recovery without hampering long-term sustainable development within the sector.

“Tourism does not need bail-outs; we must be recognised as a serious contributor to GDP and economic solutions,” said Lipman.

The new traveller wants unusual travel propositions. The new traveller wants to be the decision maker and places a lot of emphasis on responsible travel, health and wellness.

One thing is certain; people will continue to travel, regardless. However, the customer is trading down – spending less, travelling closer to home and staying for a shorter period.

The message above all else was optimism. There is significant room for growth within the tourism sector, unlike many other sectors. But the question is: are we ready for the new traveller and can we adapt our businesses to the new trends?

Dieter Semmelroth, head of finance for TUI AG, pointed out that the percentage of Germans wanting to travel has dropped from 67% to 64%. He said that there is a big demand for good-quality experiences and value for money. No one can afford to travel for the sake of travel any more. He cautioned that it will get worse before it gets better, but that by next year the industry could expect a small increase in travellers.

Domestic travel was highlighted as a key growth area and the most important factor in the immediate future is to minimise negative impact.

Lipman concluded that there remains a tiny window of opportunity for the industry. “The travel sector cannot be a passive industry any longer – we must collect, analyse and share best practice.”

Dr Auliana Poon of Tourism Intelligence International advised that the industry should play on the great memories of travellers. “Our message to the world is that travel is good for you. The world needs to travel, especially now. We should show the real value of travel, both from an economic and social perspective.” She also pointed out that “free” is the new “f” word and urged that we should focus on value, because: “It is impossible to recover from a cheap image.”

The final question posed is an important one to ponder for all involved in the tourism sector: should we not consider a serious restructuring of the industry? Should we not think differently and make significant changes now?